Five Year Delay in Foreclosure Cited to Permit Condominium to Obtain a Receiver

New York condominiums are hamstrung when dealing with defaults by unit owners where a sizeable mortgage is also in default.  NY RPL §339-Z grants first mortgage holders priority over the condominium’s common charges.  But given the typical delay in prosecuting foreclosures, the fellow condo unit owners are damaged by the continuing arrears in common charges by the defaulting owner.  Invariably, the equity in the unit being foreclosed is insufficient to pay both the mortgage and the default interest and costs thereunder and the defaulted common charges.

In Sacher, Justice Jaffe granted the condominium’s request for a receiver, addressing and rejecting the mortgagee’s claim that by permitting the receiver to rent the unit and pay common charges first she was ignoring the mortgagee’s statutory priority.

The Court cited the five year long foreclosure action and that “plaintiff [mortgagee] has repeatedly failed to foreclose on the property…”

Issues unaddressed by the decision include whether the rent may be applied to the common charge arrears.

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